USDKRW rests at 1079.90, 0.58% up from...>

KOREAN WON: USDKRW rests at 1079.90, 0.58% up from yesterday's close in line

with the resumption of the USD's broad-based rally. The won failed to benefit

from the slight move lower in the country's unemployment rate for April, which

came in at 3.8% from 4.0% in March. 

- The pair continues to trade within the 1054-1084 range despite the ongoing

widening on interest rate spreads between the US and Korea, which suggest that

the won should be considerably weaker.

- The 2-year yield spread between the two countries is currently a near-record

45bps in the US's favour, and while inflation expectations are higher in the US,

keeping real yields lower, this gap is diminishing.

- While today's won weakness has reduced some of its overvaluation relative to

real interest rate spreads, USDKRW remains roughly 9% below 'fair value'.